Otsuka bags Astex cancer drug programs, R&D ops for $886M

Just a few days after Astex reported positive mid-stage data on a lead cancer therapy, Japan's Otsuka has snapped up the U.S. biotech and its slate of experimental cancer drugs for $886 million cash. Astex shares soared yesterday afternoon as the news spread ahead of the official announcement.

In the deal, Otsuka will buy Astex shares for $8.50 each, a 48% premium over the 30-day average ahead of the deal.

Otsuka has been at work on new drugs for Alzheimer's and other disease arenas, scrambling to diversify as the patent expiration on its blockbuster schizophrenia drug Abilify looms in 2015. The Japanese company is buying a biotech which earns revenue from Dacogen, which recently added an approved treatment for elderly patients in Europe suffering from acute myeloid leukemia. But it's Astex's experimental drug pipeline that attracted the buyout offer.

FierceBiotech reported a week ago that Dublin, CA-based Astex Pharmaceuticals ($ASTX) revealed that its small molecule SGI-110 showed "clear activity" in a Phase II trial of patients with acute myeloid leukemia and myelodysplastic syndrome. The drug was given as either a 60 mg or 90 mg dose daily for 5 days in a 28-day course. The primary endpoint was overall remission rate.

Out of 67 patients, there was a 25% complete remission rate--8 remissions occurring in relapsed/refractory AML and another 9 remissions in treatment-naive elderly AML. And Astex shares jumped 20% on the data.

Astex, though, has had a bumpy ride in the drug development world. Last fall the company said that it was dumping development of amuvatinib after it flunked a mid-stage trial on small-cell lung cancer. The company said at the time that it was looking for someone to license the drug, which is still listed as a pipeline asset. Astex also has been working on the CDK inhibitor AT7519 and the HSP90 inhibitor AT13387.

Dublin, CA-based Astex has also been busy creating development partnerships with some of the global industry's top players: Novartis ($NVS), AstraZeneca ($AZN), J&J's ($JNJ) Janssen as well as Cancer Research U.K.

As is often the case when a Japanese pharma company buys a U.S. biotech, it's keeping the R&D operations in place.

"I hope that this acquisition of Astex will strengthen not only our cancer portfolio but also our drug discovery research in the central nervous system field, through the acquisition of Astex's fragment-based drug design technology at its Cambridge, England research headquarters and its California clinical oncology R&D department," says Otsuka President Taro Iwamoto. "Astex's unique fragment-based drug discovery technology and clinical oncology research and development capabilities, born out of the passion of its researchers, exemplify our corporate mottos and belief in "Sozosei (Creativity) and Jissho (Proof through Execution). I would like Otsuka Pharmaceutical to continue to respect Astex's uniqueness and leverage it to bring further growth for Otsuka Pharmaceutical."

"Otsuka itself has various new drugs in its pipeline, but the more you have, the better," Satoru Takaoki, an analyst at SMBC Friend Research Center, told the Wall Street Journal. "The company has said that its main objective for the listing of its shares was merger and acquisition, so there will be more of these deals ahead."

Jefferies LLC was the advisor to Astex in this deal while Goldman advised Otsuka.